Qualified advisers answering your
Financial Questions
call 0800 092 1245

FCA raises fears over Interest-Only Mortgages

The Financial Conduct Authority (FCA) has spoken of its concern over the ability of more than a million people to pay off final charges on interest-only mortgages.

There are currently 2.6 million people in the UK with this type of mortgage, and it is thought that over half would struggle to meet final payments when they are due. Due to this lenders have said they will contact customers to warn them about payments and prevent a payment shock, as the average shortfall is thought to be around £71,000.

Interest-only mortgages are attractive as they are a cheaper alternative to repayment mortgages. Every month you pay off just the interest on the mortgage loan. However at the end of the term, which is usually after 25 years, you agree to pay off the remainder of the loan in a lump sum. You are expected to fund this through savings, property, sale of business, inheritance or any other possible means.

However it is thought that a lack of understanding of this, as well as the lure of cheaper monthly payments tempted consumers towards interest-only mortgages, and many are now thought to be incapable of meeting final payments. New rules to ‘tighten up’ the sale of this type of mortgage are to come into force from 2014, but for many this is far too late.

However the FCA has acted to raise awareness for those who have an interest-only mortgage set to mature before 2020. This includes an agreement from mortgage lenders to write to borrowers to make sure that they have a repayment plan in place.

Paul Smee, director general of the Council of Mortgage Lenders said: “Anyone with an interest-only mortgage maturing before the end of 2020 should expect to contacted over the course of the next 12 months by their lender.”

“The aim is not to force customers to take any actions they would not wish to, but to ensure they are aware of their mortgage repayment position, and have the opportunity to take steps that may prove useful to them in avoiding unforeseen payment shocks later”.

If you an interest-only mortgage or are looking to apply for one and need help or advice, please contact a member of our advisor team who will be happy to help.

Share this..

Related stories

Financial Guides

Financial Calculators

Our useful calculators can help you get your finances in order:

Latest News


Helpful new tax year facts that could affect you and your money

Blog | Seven helpful new 2016/2017 tax year facts that could affect you and your money. Our recent online blog shares a brief outline on how to stay up to date.

Read more

Useful Links

Popular Searches

Please Enter More Details

Enter More Details